Do Wall Street economists believe in Okun’s Law and the Taylor Rule? |
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Authors: | Karlyn Mitchell Douglas K Pearce |
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Institution: | (1) Department of Business Management, North Carolina State University, Raleigh, NC 27695, USA;(2) Department of Economics, North Carolina State University, Raleigh, NC 27695, USA |
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Abstract: | We use data from the Wall Street Journal’s semi-annual survey of professional economists to test whether individual economists’ six-month-ahead predictions of real
GDP growth, unemployment, short-term interest rates and inflation reflect Okun’s Law and the Taylor Rule. We conclude the
economists believe real growth is less responsive to unemployment-rate changes than the textbook version of Okun’s Law; we
also find the economists believe the Federal Reserve sets short-term interest rates by placing more weight on unemployment
and less weight on inflation than the Taylor Rule prescribes. |
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Keywords: | |
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